The Federal Reserve's Biggest Success during the Coronavirus Crisis: Keeping Itself out of Politics

Simon Bowmaker and Paul Wachtel

By Simon Bowmaker and Paul Wachtel

By Simon Bowmaker and Paul Wachtel

Central bank independence — the ability of central bankers to make policy without interference from political authorities — became the holy grail of monetary economists in the 1990s. It was agreed that independence from political pressure was the bulwark that protected the world's economies from inflation. 

But this universal truth was challenged by the financial crisis a decade ago and seems to have crumbled in the face of the COVID-19 pandemic.

The Federal Reserve, along with other central banks, has jumped the barrier and is now working hand-in-hand with the government, doing things at the behest of Congress and, indeed, acting as the allocator of loans to the private sector for the government. Central bank independence appears to have gone up in flames. 

Read the full Business Insider article.
Simon W. Bowmaker is Clinical Professor of Economics. Paul Wachtel is Professor of Economics.